COVID-19 Limited Companies scenarios for Irish Golf Clubs

Background

The Professional Golfers’ Association is aware that Golf Clubs use a variety of business models in order to deliver their services.

Almost every Golf Club is currently affected by business interruption due to the COVID-19 emergency, while government advice and support is evolving almost daily.

Against this background, the Association is keen to provide some clarity to Golf Clubs on what government support is currently available under a number of scenarios, depending on how their individual businesses are constituted, and how this support might be accessed. This information is for guidance only. It is not intended to be prescriptive and legal and accounting/tax advice should be sought where appropriate.

This information addresses support available from the government of the Republic of Ireland. The scenarios related to UK government support, already on the PGA website, are applicable to Northern Ireland.

Types of business model

The key business situations under consideration are:

• Unincorporated Associations
• Limited companies

Many Golf Clubs, whether members clubs or proprietary clubs, will be constituted under these models and will operate as businesses subject to Corporation Tax, VAT, PAYE and business rates as appropriate to their operations.

LIMITED COMPANIES

Definition

A limited liability company in Ireland is a form of business which is legally separate from its owners and directors. It can be incorporated on-line through the Companies Registration Office (“CRO”), which confers on it the status of being a separate legal “person”. The Company Name needs to be reserved through the Irish Trade Register and, once incorporated, the limited company is governed by the requirements of The Ireland Companies Act 2014 and its own Articles of Association, and must make returns of information to the CRO.

The most prevalent types of limited company applicable to the business activities of Golf Clubs are private company limited companies, limited either by shares or by guarantee. The latter is a popular structure for members’ organisations. The members or owners of the company are protected by limited liability so the amount they have to lose if the company fails is strictly limited. This differs from an unincorporated association where there is no legal distinction between the members or owners and the business, and consequently leaves the members or owner potentially having to sell or surrender their personal assets to meet the debts of the business.

Private limited companies in Ireland must have a minimum of one director, a Company Secretary who must be resident within the EU, a physical working office and a minimum share capital of €100. New companies benefit from 0% corporation tax in the first two years of incorporation.

As a separate legal entity, a limited company is subject to taxation in its own right, and needs to register with the Revenue for Corporation Tax , and directors will also be subject to PAYE on whatever salary he or she earns as an employee of the company. Unlike unincorporated associations, companies are subject to annual audit requirements.

Scenarios

Scenario 1 - Foiseach Golf Club which is a company limited by guarantee, had just about been holding its own before lockdown and hopes to maximise its use of Government support to get back on track after the pandemic
Scenario 2 - Misneach Golf Club, a proprietary Club which is a company limited by shares, had operated very successfully pre-lockdown and intends to expand on that success when golf reopens in Ireland

The scenarios that follow are intended to be samples of situations which might arise, and should be treated as indicative to allow a Golf Club operating as a limited company to best assess its likely situation in relation to the COVID-19 financial challenges.

The Club, despite facing the same challenges in terms of membership numbers, visitor footfall and cost management as many other facilities, still manages to maintain a healthy core membership, capitalising on its proximity to Dublin and its access to the transport network.

The club employs a General Manager and an assistant, a Barman who has two part time staff to call on, and a team of four Greenkeepers - a total of nine employees. The catering service is franchised and clubhouse cleaning is provided under contract. The PGA Professional has been retained at the Club for the over 15 years and provides the full range of golf services to members and visitors through his team, which includes a qualified assistant PGA Professional and a trainee.

The business of the Golf Club is directed by a volunteer Board of 12 directors, who are members of the Club, with a Chairman who serves a term of three years heading the Board and providing some continuity of leadership, and a President, appointed annually, as the public facing representative of the Golf Club.

Membership numbers have fluctuated a bit in recent years but have settled at around 600 ordinary members and just over 85 Clubhouse members. The latter category of membership was introduced by the Board in 2019 with a view to offsetting a falloff in ordinary membership numbers; engaging with nomadic golfers by providing a number of rounds per year and generally enabling them to experience the benefits of club membership; and encouraging the local community to access the bar and catering facilities the Club has to offer. While the Club made an operating loss of €10,000 in 2017, it managed to break even the following year, and in 2019 generated a reasonable surplus as the Board’s innovations began to take effect.

The Board was keen that, during 2020, the ordinary membership numbers should be expanded through attracting new members and converting some of the Clubhouse members to full membership; the number of Clubhouse members should be increased to keep local engagement on an upward curve; and efforts would be concentrated on attracting more visiting parties to generate additional income. The budgeted surplus for the year was €25,000 which it was intended to use to bolster reserves, deploy on course development and support the forthcoming centenary celebrations for Foiseach Golf Club in 2021.

The onset of the COVID-19 pandemic crisis in March 2020 culminating in the closing down of golf throughout the island of Ireland has necessitated a rethink by the Board and they are committed to consolidating the position of the Club and taking advantage of government support available in order to minimise the financial and operational impact of this unforeseen business interruption.

The decision was made to lay off the administration assistant, the bar staff and two of the greenkeepers by accessing the COVID-19 Wage Subsidy Scheme and the General Manager made a self-declaration for the company to the Revenue in support of its application for inclusion on the Scheme, which he processed by logging in to the Revenue On-Line Service myEnquiries section. The scheme is intended to run for 12 weeks from March 26, 2020.

The General Manager remained employed on a full time basis, albeit largely working from home, to support the Golf Club in its continuing operations and in its preparations for golf restarting after the COVID-19 pandemic, while two greenkeepers were retained to undertake essential maintenance.

On behalf of the Board, the General Manager discussed the situation with the staff who were being laid off, all of whom fully appreciated the need for the temporary lay-off, and welcomed the fact that their income will be largely secured for the coming weeks. The staff will not qualify for a social welfare payment through the COVID-19 Pandemic Unemployment Payment since the Golf Club has implemented the COVID-19 Wage Subsidy Scheme.

The General Manager confirmed to the staff that the Board remains keen to try and top up their wages to their current level, as long as finances allow, and will keep this under review when the scheme moves to a subsidy payment, based on different income threshold bands identified within the scheme, during May 2020. At that time, the subsidy available to employers will be based on 70% of the average weekly take home pay of the employee, computed after the deduction of tax, USC and PRSI and based on average pay in January and February (which is of course a particularly quiet time for golf clubs, so may have a more significant impact on the amounts available to bar staff than on those earning a regular monthly salary).

The PGA Professional also had to mothball his business when lockdown commenced. He has decided to temporarily lay off his two staff members and seek to access funding under the terms of the COVID-19 Wage Subsidy Scheme. The PGA Professional, the Assistant and the trainee were on the payroll at the cut-off date of February 29 and by using the scheme it will allow all of them to remain registered as employees and enable them to get back to work quickly after the crisis.

The PGA Professional would, under normal circumstances, have generated between 35% and 40% of his annual turnover during the period between the middle of March and June 30, but his shop has had to close, his team is unable to coach or custom fit and his commission income has totally dried up. Therefore he can clearly demonstrate that he is experiencing significant economic disruption because of the COVID-19 pandemic, meaning he is unable to fully pay his normal wages and outgoings.

The Golf Club’s catering and clubhouse cleaning contractors, with their services not required during lockdown, should be able to access either the COVID-19 Wage Subsidy Scheme or the COVID-19 Pandemic Unemployment Payment depending on their individual business and employment circumstances.

The Board is conscious that the Club’s cash flow is likely to be under pressure while lockdown is in place and indeed in the months after as golf is phased in again, and visitors and members start to use the facilities on offer. The Club is in a fortunate position in that subscriptions were due to be paid by February 29, and around 75% of the expected income had been received by that date. However, some members who were running late with their payments have continued to hold off until it becomes clearer whether golf will be restarting over the summer months. This is particularly prevalent for the Clubhouse membership category who see little prospect of accessing catering and bar facilities perhaps for months, which is likely to have a negative impact on the Board’s ambitions to grow this category of membership during 2020.

The General Manager investigated the potential of accessing a MicroFinance Ireland COVID-19 Business Loan and believes the Club meets the criteria since the its turnover and profits are likely to be more than 15% down on normal, and turnover is well below the €2m maximum. In addition, there are fewer than 10 employees on the payroll.

The Club is unlikely to be able to access loan funding through the Irish banks should it require finance to support the business post-pandemic, so access to a MicroFinance Ireland COVID-19 Business Loan of between €5,000 and €50,000 could be particularly useful in the short term since the loan attracts 0% interest in the first 6 months, and there are no penalty clauses for early repayment.

The Board will consider in the next few days whether applying for a loan is desirable and, if necessary, the General Manager will process an application via MicroFinance Ireland.

In the meantime, the Board, on the General Manager’s recommendation, decided to take advantage of the Revenue’s decision to suspend interest on late payment of PAYE liabilities for February, March and April and to delay payment of these liabilities for the time being to maximise its cash flow position during this time of uncertainty.

The Club is registered for VAT and its bi-monthly VAT submission for January/February 2020 was submitted on time by March 19, so it was able to take advantage of the suspension of interest on late payments to delay paying that VAT liability for the time being, and thus further support its cash flow position. The late payment of interest suspension has since been extended to cover the return due for March/April 2020 and, while the VAT return has to be submitted on time by May 19, the VAT payment for that period can again be delayed.

The Club might also be able to defer its Business Rates payments through consultation with the local authority but the Board decided that it might be prudent to continue to pay its rates since it has received a good proportion of its subscription income, rather than add an additional debt which will need to be managed over a relatively short term.

The General Manager is also aware of the new Business Continuity Voucher which is available through Local Enterprise Offices. This voucher is worth up to €2,500 in 3rd party consultancy costs and can be used by businesses to work with qualified experts, selected from existing Local Enterprise Offices and Enterprise Ireland Panels, to develop strategies to respond to the pandemic. The General Manager is not sure whether this will be of use to the business but will explore, in consultation with the Chairman and the Board, whether, as part of the Club’s plans for consolidating then building the business after the pandemic, they should consider applying for a Business Continuity Voucher by completing the form available on localenterprise.ie.

In summary, at this time Foiseach Golf Club can take advantage of the Irish government’s COVID-19 Wage Subsidy Scheme as a method of keeping a number of staff registered as employees during the business interruption caused by the COVID-19 pandemic. Its contractors – the PGA Professional, Catering and Cleaning services – are able to take advantage of either that scheme or the COVID-19 Pandemic Unemployment Payment, depending on the individual circumstances of their businesses.

The Club is likely to be able to access a loan through the MicroFinance Ireland COVID-19 Business Loan scheme to position itself for successfully restarting the business. It can also delay payment of VAT instalments for the first four months of 2020 without incurring interest and penalties, and PAYE liabilities for February, March and April.

The General Manager, in communication with the Chairman and the Board, has been proactive throughout the lockdown period and is keen to best position the club for the restart of activities and beyond. Consideration is therefore currently being given to whether the Business Continuity Voucher might be of use to support business planning activity.

The 5 phase plan for the restart of golf in Ireland, due to commence on May 18, has been welcomed by the Board, and an implementation plan has been prepared, with input from the General Manager, PGA Professional and Head Greenkeeper to meet the specific requirements of the Club. It is anticipated that, initially, demand will be very localised as the 5km restriction will be in place, but when that is lifted demand will increase from Dublin based members, guests and ultimately visitors.

The PGA Professional is willing to open the pro shop, with appropriate safeguards in place, as a service to the members and the Club, but will undertake all the work himself rather than restart his Assistant and trainee before he has had time to assess the time and activity the service requires in the interim period. He has, with the Club’s other key personnel, helped develop a plan for opening hours and tee times which also sets periods aside for greenkeepers being able to work on the course while maintaining proper social distancing. Tee times will all need to be booked on-line, and the PGA Professional will manage compliance with the tee sheet and other safeguarding requirements during the agreed opening hours. He has also secured the PPE he needs to allow him to provide the service, and has put the General Manager in touch with the PGA’s identified PPE supplier to allow the Club to access the same service and rates for PPE, hand sanitiser etc as he has.

During the early stages of the phased return the PGA Professional has little prospect of any compensating income-earning activity from retail and coaching although he is hopeful that by Phase 2 and beyond these activities will be able to restart, and he will be able to bring his staff back to cover all aspects of the service.

The Golf Club itself plans to bring the greenkeeping team back up to full capacity with immediate effect, and has asked the cleaning contractor to start a limited service to maintain the toilet, locker room and office facilities to a suitable standard of hygiene from the weekend before the May 18.

Club activities are unlikely to start generating any additional income, other than from the occasional members’ guest fee, until at least the end of June, when the catering facility is likely to be able to re-open in Phase 3 of the plan, subject to strict guidelines, and visiting golfers can start to be accommodated. However any additional income even at that time is likely to be offset with the costs of the return of laid-off staff who had been retained on the payroll.

The proactivity of the Board, General Manager and other key contributors in steadying the financial management of the Club over the last 2-3 years, generating a surplus and some reserves, addressing membership category challenges and developing a longer term strategy defining the anticipated direction of travel has been invaluable in positioning the Club to be able to address some of the issues it has faced during the pandemic.

Clearly, the original budgeted surplus for the year of €25,000 is now likely to be under threat, so there may not be the capacity to bolster reserves to the extent the Board might want nor to undertake some of the planned course development. The Board intends to keep financial forecasts under constant review and take corrective action as necessary to protect the business of the Club.

It has confirmed that its main priority will be to look after the members who have remained loyal and supportive during the last few difficult months, and particularly as it leads up the Centenary Year in 2021. The Board is clear that, if anything, the pandemic has proven that the value attached to membership of the Club is paramount to its future success, and if that means that visitor numbers have to be sacrificed due to capacity issues, then corresponding changes will be made in visitor green fees and in the times that the course can be made available to visitors.

In the meantime, the General Manager is working on initiatives for marketing the Club, particularly to new members, in advance of the Centenary Year and progressing plans for the forthcoming centenary celebrations at Foiseach Golf Club next year.

In conclusion, the Board and management at Foiseach Golf Club has had success in recent times in improving the financial position of the Golf Club. This, along with a culture of longer term planning, strategy and a willingness to address issues head on, put the club in a position to be able to identify and take advantage of the support provided by Government, including deferrals, loans and business planning advice in order to mitigate the impact of the COVID-19 pandemic on its financial position and operational activities. It can now consolidate its position as golf restarts in Ireland by:

• Careful planning, strategy and focusing locally and on its membership
• Analysing its business needs on an ongoing basis and reacting to necessary changes as and when they are identified
• Prioritising on safety with strict hygiene and logistics.

A proprietary club, constituted as a company limited by shares, it boasts two championship class 18-hole courses, and top practice, retail and clubhouse facilities.

The Club employs a General Manager and small team of administrators with specific emphasis on finance, marketing and membership, a Food and Beverage Manager with a supporting Clubhouse Services Team, and a PGA Professional Director of Golf who manages the on course play, greenkeeping, retail and coaching activities. The PGA Professionals attached to the Club in retail and coaching roles are all employees, while the greenkeeping team, headed by the Links Superintendent, is substantial in number, as would be expected for the standard of the facility.

The Club’s business is directed by a Board of 8 directors, with a variety of professional backgrounds and skills. The Chairman, a position without specific time limits, leads the Board and a Club President, who serves a two-year term of office, is the public facing representative of the Golf Club. The governance structure is appropriate to the business, with two particular relationships being key to the successful delivery of the Club’s strategy:

• The relationship between the Chairman, representing the Board which sets the strategy and the General Manager, who has been delegated the authority and responsibility for delivering the strategy
• The management team of the General Manager, the Director of Golf, Food and Beverage Manager and Links Superintendent, who meet regularly – at least weekly – to keep operational delivery on track.

The onset of the COVID-19 pandemic crisis in March 2020, culminating in the closing down of golf throughout the island of Ireland has had a serious impact on the Club’s turnover, since there are no corporate, society or international visitors. Visitors who had booked tee times during the period of the lockdown have been contacted and given the opportunity to rebook at some future date, and while this offer has been accepted by many, others have requested a refund on their green fees, which clearly has an impact on the Club’s cash flow.

The Club is in the fortunate position of having benefited from the Celtic Tiger a number of years ago and has built up healthy reserves since then, so is financially solid. However the Board is aware that it needs to rein things in in the short to medium term with very little income coming in, but to plan for a strong return when golf and travel become more accessible for all.

The onset of the COVID-19 pandemic crisis in March 2020 culminating in the closing down of golf throughout the island of Ireland has necessitated a rethink by the Board and they are committed to using the enforced lockdown to manage the current situation in the most economical, efficient and effective way possible. Responsibility for this lies with the General Manager who immediately set out to taking advantage of government support to minimise the financial impact, while retaining the key staff team in post to undertake planning work, not just for the return of golf, but for future operations for the rest of this year and beyond.

Since the hospitality, retail and coaching operations have had to cease, the majority of the Club’s staff, including administration staff, were laid off through accessing the COVID-19 Wage Subsidy Scheme and management will top up the salaries paid to these staff as Government encourages responsible employers to do.

However, the key members of staff, specifically the General Manager, the Director of Golf, the Food and Beverage Manager and the Links Superintendent, along with the financial accountant and the membership administrator were retained in their full time positions, albeit largely working from home.

Six members of the greenkeeping team also continued to be employed full time in order to undertake essential maintenance, albeit with appropriate safeguarding and hygiene measure in place. The other greenkeepers were laid off under the COVID-19 Wage Subsidy Scheme. Using this scheme will allow the General Manager to keep the team registered as employees and enable them to get back to work quickly after the crisis.

The General Manager also plans to take advantage of the available VAT and PAYE payment deferral arrangements, and the financial accountant is currently liaising with the Revenue on behalf of the business to agree a deferral arrangement or phased payment plan for the outstanding PAYE. There are no plans to contact the local authority to try and defer the payment of Business Rates.

While the financial support from Government is important to the business, the General Manager and his team are more focused on two things:

• Long term business planning
• Planning for the safe reopening of golf at Misneach Golf Club.

The members of staff who had not been laid off had been retained with the primary purpose of progressing these two priorities.

The General Manager was aware of advisory, grant funded and bank loan support available through various bodies in the Republic of Ireland to enable businesses to develop and support strategies and plans. He tasked the financial accountant with identifying, assessing and making recommendations on whether some of these initiatives might be appropriate to the business.

The financial accountant initially contacted the Department of Business, Enterprise and Innovation’s Business Support Call Centre for information on the Government support available to businesses and enterprises affected by COVID-19 by calling (01) 631 2002 and following the discussions up by emailing infobusinesssupport@dbei.gov.ie.

After considering the advice received, the financial accountant:

• Recommended that consideration should be given to applying for a loan under the Strategic Banking Corporation of Ireland Working Capital scheme, since the Club meets the criteria as an eligible affected business and may therefore be able to secure a loan of between €25,000 to €1.5 million at reduced rates, with up to the first €500,000 unsecured. Certain restrictions apply on the use of the loans. Specifically they can be used for future working capital requirements or to fund adaptation of the business to mitigate the impact of COVID-19, but cannot be used to refinance existing debt or undertakings in financial difficulties. The loans are available through AIB, Bank of Ireland and Ulster Bank, and while approval of loans are subject to the banks own credit policies and procedures, businesses cannot complete a loan application until they have received their eligibility letter from the Strategic Banking Corporation of Ireland. The application process is detailed here.
• Noted that because of the operational size and financial position of the business, it was not eligible for a MicroFinance Ireland COVID-19 Business Loan
• Advised that the business was not eligible to access advice from third party consultants on the development of short term and long term strategies to deal with the COVID-19 situation through the support of Business Continuity Vouchers. Had it been eligible, it may have been able to work directly with qualified experts selected from existing Local Enterprise Office and Enterprise Ireland panels.

The financial account continues to explore additional advisory and financial support that might become available through Enterprise Ireland and the Local Intreo Office.

The remaining members of the management group will continue to develop the future strategy of the business in relation to the contributions from each of their pillars of activity, and progress will being fed back and redirected as necessary during weekly remote team meetings. The idea is to present the Strategy and a supporting implementation plan to the Board in early June for approval, and the General Manager is keeping the Chairman informed of progress on a continuous basis.

The 5 phase plan for the restart of golf in Ireland, due to commence on 18 May, has been welcomed by everyone, and an implementation plan has been prepared, with input from the management group to meet the specific requirements of the Club. The current thinking is that it is unlikely to be cost effective to open the facility in Phase 1 of the plan for reopening since there are few if any members who live within 5km of the golf course. However the golf operations team will take the extra time before the lifting of the 5km exercise restriction to prepare and test the planned safeguarding measures and the greenkeepers will all return to duties to work on the presentation and quality of the golf course.

In summary, while the pandemic has had a serious impact on the operations and profitability of Misneach Golf Club, the business started from a strong position in terms of financial stability, governance and management and has been able to spend the lockdown time effectively in accessing government support, planning for the reopening of golf and developing a strategy for both bouncing back from the effects of the pandemic and capitalising on its healthy starting position to take advantage of the opportunities that will arise when things return to the new normality.